Contents 14 sections
Transactions between a Turkish company and its shareholders, parent company, subsidiaries or other related parties must be priced according to the arm’s-length principle. An intercompany invoice alone is not enough: the company should be able to demonstrate the transaction, commercial benefit, pricing method and supporting calculations.
Turkey’s principal transfer pricing rules are contained in Article 13 of Corporate Tax Law No. 5520 and the General Communiqué on Disguised Profit Distribution through Transfer Pricing. The framework is broadly aligned with OECD transfer pricing principles but includes specific Turkish reporting, documentation and correction rules.
The rules can apply to sales of goods, management services, royalties, shareholder loans, guarantees, cost allocations, commissions, leases and asset transfers. They are especially important for foreign-owned Turkish companies making recurring cross-border payments to group entities.
Core rule: The price or consideration used between related parties should be consistent with the amount that independent parties would have agreed under comparable circumstances.
What Is Transfer Pricing?
Transfer pricing is the process of determining the price of goods, services, financing or other transactions between related parties. Common examples include:
- a Turkish subsidiary purchasing products from its foreign parent company;
- a Turkish company paying a regional group company for management services;
- an overseas shareholder lending money to its Turkish subsidiary;
- a Turkish distributor paying a royalty for group trademarks or software;
- group companies allocating shared IT, finance, marketing or personnel costs;
- assets or intellectual property being transferred between group companies; and
- a Turkish company selling goods or services to another entity controlled by the same shareholder.
The existence of a related-party transaction is not prohibited. The purpose of the rules is to ensure that taxable profit is not shifted through prices or conditions that independent businesses would not normally accept.
Who Is Considered a Related Party?
The Turkish definition of a related party is wider than direct parent-subsidiary ownership. Depending on the facts, related parties may include:
- the company’s direct or indirect shareholders;
- individuals or entities controlled by the company or its shareholders through management, supervision or capital;
- companies under common direct or indirect control;
- the spouse and specified relatives of an individual shareholder;
- entities controlled by those individuals; and
- persons located in certain jurisdictions identified under the statutory harmful tax competition rules.
Where the relationship arises through shareholding, voting rights or rights to dividends, the statutory 10% threshold must be considered. Direct and indirect interests should be reviewed together rather than looking only at the name appearing in the Turkish company’s shareholder register.
Important: A transaction can remain subject to the arm’s-length principle even when both parties are Turkish companies. Whether an annual report is required is a separate documentation question.
What Is the Arm’s-Length Principle?
The arm’s-length principle requires related parties to use prices and commercial conditions comparable to those that would have applied between independent businesses.
A defensible analysis does not examine the invoice amount alone. It normally considers:
- the functions performed by each party;
- assets used, including intellectual property;
- commercial and financial risks assumed;
- contractual terms and actual conduct;
- market conditions and geographic differences;
- transaction volume and payment terms;
- the business strategy and economic circumstances; and
- internal or external comparable transactions.
A written agreement is important, but tax authorities may also review whether the parties actually performed the functions and assumed the risks described in that agreement.
Transfer Pricing Methods Accepted in Turkey
The method that provides the most reliable arm’s-length result for the transaction should be selected. The main accepted methods are:
| Method | How it works | Typical use |
|---|---|---|
| Comparable Uncontrolled Price | Compares the controlled price with a comparable transaction between independent parties. | Commodities, standard products, loans, licences or transactions with reliable internal comparables. |
| Cost Plus | Applies an arm’s-length mark-up to the supplier’s relevant cost base. | Routine services, contract manufacturing and certain shared-service arrangements. |
| Resale Price | Works backwards from the resale price by deducting an appropriate gross margin. | Distribution businesses that resell products without significant modification. |
| Transactional Net Margin | Compares a transaction-related net profit indicator with independent comparables. | Routine manufacturing, distribution and service operations where gross-margin data is unavailable. |
| Profit Split | Divides combined profits according to each party’s economically significant contribution. | Highly integrated operations or transactions involving unique and valuable intangibles. |
Using the easiest method is not sufficient. The company should document why the chosen method is the most appropriate and explain any comparability adjustments or profit-level indicators used.
Turkey’s Transfer Pricing Documentation Structure
Turkey uses several related but distinct transfer pricing documents. A filing threshold for one document does not remove the obligation to apply arm’s-length pricing or retain evidence.
| Document | General scope | Timing |
|---|---|---|
| Annual transfer pricing form | Corporate taxpayers report relevant related-party information and transactions. The form instructions use an annual total net amount of TRY 30,000 or more for each related party. | Submitted electronically with the annual corporate income tax return. |
| Annual transfer pricing report | Scope depends on the taxpayer. Large-taxpayer, free-zone and other corporate taxpayers have different domestic and cross-border transaction coverage. | Prepared by the corporate tax return deadline and retained for submission upon request. |
| Master File | Generally applies to Turkish members of multinational groups where both the applicable balance-sheet asset total and net sales reach TRY 500 million. | Prepared by the end of the fiscal year following the relevant accounting period and retained for submission upon request. |
| Country-by-Country Report | Generally applies where the multinational group’s consolidated revenue for the preceding period reaches EUR 750 million. The filing party depends on the ultimate parent, surrogate filing and exchange arrangements. | Generally due by the end of the twelfth month after the reporting period; a separate notification is generally due by the end of the sixth month. |
The TRY 30,000 amount is a form-reporting threshold, not a transfer pricing safe harbour. Transactions below that amount must still comply with the arm’s-length principle and should be supported by ordinary accounting and commercial records.
Who Must Prepare an Annual Transfer Pricing Report?
The transaction coverage of the annual report depends on the taxpayer’s status:
- taxpayers registered with the relevant Large Taxpayers Tax Office generally report both domestic and foreign related-party transactions;
- corporate taxpayers operating in free zones have specific reporting obligations for covered domestic transactions; and
- other Turkish corporate taxpayers generally prepare the annual report for transactions with foreign related parties.
Domestic transactions excluded from a taxpayer’s annual report scope are not outside the transfer pricing rules. The taxpayer must still be able to explain the transaction and retain supporting calculations if requested during a tax examination.
What Should the Transfer Pricing File Contain?
A practical Turkish transfer pricing file commonly includes:
- the taxpayer’s ownership and organisational structure;
- a description of the business, sector and relevant market;
- a list of related parties and the relationship with each party;
- transaction categories, amounts, currencies and invoice details;
- copies of intercompany agreements;
- a functional analysis covering functions, assets and risks;
- the selected pricing method and reasons for its selection;
- internal or external comparable data and adjustments;
- financial calculations reconciled with statutory accounting records; and
- evidence that services, licences, financing or other benefits were actually provided.
Documentation should be consistent with invoices, contracts, general-ledger accounts, withholding declarations, VAT records, customs values and the figures reported in the corporate tax return.
Our Tax, Bookkeeping and Accounting Services in Turkey help foreign-owned companies reconcile intercompany invoices and related-party balances with their Turkish statutory records.
Special Risk Areas for Foreign-Owned Companies
| Transaction | Questions to document | Common risk |
|---|---|---|
| Management services | What service was performed, who performed it, and how did the Turkish company benefit? | Generic invoices without deliverables, personnel records or a reasonable allocation key. |
| Shareholder or group loan | Is the interest rate, term, currency, security and borrower risk arm’s-length? | Interest-free or excessive-interest financing and interaction with thin-capitalisation rules. |
| Royalty or software fee | What right is licensed, who owns it, where is it used and how was the royalty rate calculated? | Paying for a right that is not used or duplicating services already included in another group charge. |
| Cost allocation | Does the allocation key reflect the benefit received by each participating company? | Allocating shareholder, duplicate or unrelated costs to the Turkish company. |
| Purchase or sale of goods | Are product, volume, market, freight, warranty and payment differences reflected? | Using a group price without analysing the Turkish distributor’s functions and margin. |
Transfer Pricing and Other Turkish Taxes
A transfer pricing review should not be performed only for corporate income tax. An adjustment or reclassification may also affect:
- VAT or reverse-charge VAT;
- corporate income tax withholding;
- dividend withholding when an amount is treated as disguised profit distribution;
- stamp tax on intercompany agreements;
- banking and insurance transaction tax in relevant financing cases;
- customs valuation for imported goods; and
- thin-capitalisation and financing expense limitation rules.
Cross-border service, interest, royalty and dividend payments may also require a separate treaty and withholding analysis. See our guide to Withholding Tax in Turkey.
What Happens If the Price Is Not Arm’s-Length?
When a company transfers profit through non-arm’s-length prices, the relevant amount may be treated as disguised profit distribution through transfer pricing. Potential consequences include:
- an increase in the Turkish company’s taxable corporate profit;
- treatment of the adjustment as a non-deductible expense;
- tax loss penalties and late-payment interest;
- deemed dividend and withholding consequences depending on the recipient;
- additional VAT or other indirect-tax disputes; and
- corresponding-adjustment or double-taxation issues in the other country.
Turkish law provides a potential 50% reduction in the tax loss penalty arising from transfer pricing where the documentation obligations are fulfilled completely and on time, subject to the statutory exclusions. This does not remove the underlying tax or interest assessment.
Year-end adjustment warning: A group-level transfer pricing adjustment should not be posted automatically. The Turkish company must review invoicing, VAT, withholding, customs, currency conversion and accounting-period consequences before recording it.
Advance Pricing Agreements
A corporate taxpayer with cross-border related-party transactions may apply to the Turkish Revenue Administration for an advance pricing agreement. An agreement can determine an appropriate pricing method and related criteria in advance for a period of up to five years.
Depending on the countries and tax treaty framework involved, the process may be unilateral, bilateral or multilateral. A rollback to previous open tax years may also be possible when the relevant facts and circumstances are sufficiently similar.
An advance pricing agreement is generally more relevant for recurring, material or complex transactions where prospective certainty justifies the preparation and administrative process.
Annual Transfer Pricing Checklist
- Update the shareholder, group and related-party list.
- Reconcile related-party accounts with the general ledger.
- Classify goods, services, financing, royalties and other transactions separately.
- Confirm that signed agreements reflect the parties’ actual conduct.
- Collect service deliverables, allocation schedules and benefit evidence.
- Review the pricing method and update comparable financial data.
- Test margins and interest rates before the financial year is closed.
- Check annual form, Local File, Master File and CbCR requirements separately.
- Reconcile documentation with VAT, withholding and customs records.
- Retain the final file so it can be produced promptly during a tax review.
Our Turkish Tax Advisory Services support foreign-owned companies with related-party transaction mapping, Turkish documentation requirements and coordination of cross-border tax positions. Transactions being designed in advance can also be reviewed through our Strategic Tax Planning Services in Turkey.
Review Related-Party Transactions Before Year-End
We help foreign-owned companies identify related-party transactions, reconcile accounting records and define the Turkish tax and documentation workstream.
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Official Sources
- Turkish Revenue Administration: Corporate Tax Law No. 5520
- Turkish Revenue Administration: General Communiqué on Disguised Profit Distribution through Transfer Pricing
- Turkish Revenue Administration: Transfer Pricing Documentation Decision
- Turkish Revenue Administration: Mutual Agreement Procedure and Advance Pricing Agreement Guidelines
- OECD Transfer Pricing Country Profiles
Last reviewed: 10 August 2026. This article provides general information and does not constitute tax or legal advice. Documentation scope, filing obligations and the most appropriate pricing method depend on the taxpayer, transaction and current legislation.
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